The agreed upon $1.15/ordinary share and $25/preference share equates to $83 million in equity value. The offer has been approved by FX Energy’s board.
Under the deal’s terms, Orlen Upstream will announce a tender offer for the company shares. Orlen Upstream plans to purchase shares tendered by FX Energy shareholders through a subsidiary of Orlen Upstream registered in the US. The total deal value including the assumption of FX Energy net debt will amount to $119 million.
The deal encompasses 8.4 million boe of 2P reserves. FX Energy has assets in the Fences and Edge areas of Lowland Poland, and owns a concession block in the Lublin basin neighboring Orlen Upstream’s Wolomin and Garwolin concessions. FX Energy also produces crude oil from conventional assets in Montana and Nevada in the US.
Fences consists of 4 exploration blocks in Greater Poland Voivodeship in well-recognized, prospective areas containing numerous concentrations of hydrocarbon deposits, Orlen says.
The primary target reservoir and prospective subsurface is Rotliegend sandstone at a depth below 2,000 m. Orlen describes the area as one of the most prospective exploration areas of this kind of geological formation in Poland, with reduced exploratory risk.
FX Energy owns 49% interest in 7 producing fields with the remainder held by Polish state-owned PGNiG. The net production amounts to 350,000 cu m/day of the nitrogen-rich natural gas.
The Edge project area consists of 4 exploration blocks 100% owned by FX Energy. The Zechstein and Devonian carbonaceous formations are the area’s most prospective geological zones, and the Tuchola deposit, discovered in 2013, is being prepared for development, Orlen says.
FX Energy operates concession area 255 of the Lublin basin with 51% interest. PGNiG is a minority shareholder. Main exploration targets are Carboniferous sands and shales as well as Devonian carbonate rocks. A commercial deposit has also previously been discovered at the concession area.
“In line with our strategy in the upstream segment we strive to achieve potential production of 6 [million boe/year] in 2017,” said Jacek Krawiec, PKN Orlen president and chief executive officer. “Today we initiated the process of acquisition of FX Energy, which is the next step in building the upstream portfolio in Poland and abroad. This will allow us to diversify it through expanding our conventional assets and commence production of hydrocarbons by PKN Orlen in Poland.”
The deal is expected to close in fourth-quarter 2015 or first-quarter 2016.